The direct effects of COVID-19 on the financial performance of a.s.r. were positive in 2021. The ultimate, and longer term impact of COVID-19 on future results are however difficult to predict. This will depend on, among others, the ongoing development and spread of COVID-19 and its impact on society and the economy and on government support to companies and organisations affected by this impact.
a.s.r. has set itself ambitious group targets, positioning itself for profitable growth. All targets set were achieved by the end of 2021, except for the target employee contribution to local society due to the COVID-19 related lockdowns and social distancing restrictions in 2020 and 2021.
a.s.r. aims to maintain a strong capital position with a Solvency II ratio safely above 160% (based on the standard formula). This enables a.s.r. to deploy capital for entrepreneurial purposes, to absorb certain financial shocks and to be able to pay cash dividends. The Solvency II ratio (after the proposed full year dividend) decreased by 3%-points to 196% (2020: 199%) and was well above the target of safely above 160%.
As a rational and economical allocator of capital a.s.r. has set a target range for the return on equity deployed in its businesses. Given the confidence a.s.r. has in its businesses and their strong performance in recent years, a.s.r. had set a target for Operating Return on Equity (ROE) in the range of 12-14%. The Operating ROE over 2021 was 16.3% (2020: 15.3%).
a.s.r.’s dividend policy applicable in 2021 comprises a pay-out ratio of 45–55% of the net operating result attributable to shareholders (i.e. after tax and net of costs related to the hybrid capital instruments) as well as an ambition to offer shareholders a stable to slightly growing dividend per share. Management proposes a total dividend of € 2.42 per share for the full year of 2021 (2020: € 2.04 per share). This is a 18.6% increase compared to the dividend of 2020 and reflects, in addition to strong business performance, the extraordinary and incidental effect from COVID-19.
a.s.r. has also set a target for organic capital creation (OCC), which was set for 2021 at more than € 500 million. The OCC in 2021 was € 594 million (2020: € 500 million).
The maximum level of financial leverage has been set at 35%. This supports a.s.r.’s Standard & Poor's (S&P) rating target of at least Single A. The financial leverage stood at 24.8% at year-end 2021 (2020: 28.3%) and the S&P rating was confirmed at Single A during the year.
a.s.r. aspires to create sustainable value for all its stakeholders and has set four non-financial targets as an integral part of its strategy.
Customers are at the heart of a.s.r.‘s purpose and its strategy is aimed at meeting their needs. a.s.r. measures how customers experience its services using the NPS-c. With the NPS-c, a.s.r. measures how employees interact with customers. The following question is asked: how likely are you to recommend a.s.r. to your family, friends and colleagues based on your experience with the a.s.r. employee? The NPS-c is measured separately for all business lines excluding Mortgages. The consolidated NPS-c is determined by the arithmetic mean of the scores of the business lines.
In 2021, at 49 (2020: 49), the NPS-c customer contact moments remained stable throughout the year. This confirms that a.s.r. is appreciated for the way it deals with its customers. The NPS-c per business line is shown in chapter 4.1 and in chapter 7.5.
a.s.r. monitors the carbon footprint of its investments and has set a target to measure at least 95% of its entire investment portfolio for its own account by 2021. The carbon footprint is calculated in accordance with the methodology of the Partnership for Carbon Accounting Financials (PCAF) where applicable. a.s.r. actively contributes to the development of metrics for additional asset classes as well as for indirect investments. The percentage shown is calculated by dividing the value of the investments for which the carbon footprint is known by the value of the total investment portfolio for own account, which includes a.s.r. asset management (AVB), a.s.r. real estate (Real Estate) and a.s.r. mortgages (Mortgages).
At the end of 2021 the percentage of the carbon footprint calculated of the entire investment portfolio for its own account was 96%, a substantial increase compared to last year and above target of 95% (2020: 93%). This increase is due to an improvement of the percentage calculated at AVB of 96% (2020: 92%) and Mortgages of 98% (2020: 96%). The percentage calculated for Real Estate decreased to 89% (2020: 94%) due to a new data supplier. In the coming years, the focus will be on further reducing carbon emissions as insights in the actual carbon emissions has been largely achieved.
In 2018, a.s.r. set the target of increasing impact investments for its own account to a total of € 1.2 billion of impact investments in 2021. A definition of impact has been determined for every asset class, and special focus is given to themes such as energy transition, health and environment. These definitions are included in chapter 7.7.
The total amount of impact investing in 2021 increased substantially to € 2.5 billion (2020: € 1.7 billion), this is far above the target for 2021. This increase is due to the amount of impact investing at AVB, which was € 2.4 billion in 2021 (2020: € 1.6 billion), Real Estate at € 0.11 billion (2020: € 0.09 billion) and Mortgages at € 0.05 billion (2020: € 0.01 billion). The large increase of impact investing at AVB is due to a steady growth of impact investments over all asset classes and since the third quarter of 2021 the addition of the first impact investments within the structured credits investments. The increase of impact investing at Mortgages is due to an increasing number of sustainability linked mortgages products and services.
a.s.r. encourages its employees to support local society and communities by devoting part of their time to helping individuals and / or groups with financial difficulties on a voluntary basis. a.s.r. provides financial education courses for children, helps families to understand and improve their financial planning and assists communities in more general ways. a.s.r. aims for an annual growth of 5% of time spent by employees compared to the base year 2018 by participating in the activities of the a.s.r. foundation.
The COVID-19 measures have challenged the employees’ voluntary efforts. a.s.r. put the health and safety of its employees and the people who needed help first. Due to the social distancing required by COVID-19, many of the planned activities could not take place. The hours spent by employees amounted to 5,571, which is 45% less than the target for 2021 (10,100 hours).
In P&C and Disability combined, a.s.r. aims to achieve a COR in the range of 94-96%. This reflects a.s.r.’s leadership in managing these businesses profitably whilst remaining competitive. The range also allows a.s.r. to absorb a certain number of calamities, such as major fires and heavy storms. a.s.r. expected that in a year with an average number of storms and large claims, it could deliver a COR of < 96%. The COR for P&C and Disability combined amounted to 91.8% for 2021 (2020: 93.6%) and outperformed the target range of 94-96%. This improvement is mainly due to a decrease in the claims ratio. The claims ratio benefited from the COVID-19 impact (approximately -3%-points), this is more favourable than last year (2020: approximately -1%-point).
Reflecting a.s.r.’s ambition for profitable growth is its target GWP of growth for P&C and Disability combined. a.s.r. aims to grow this organically by 3-5% per annum while remaining within the targeted COR range. In pursuit of profitable growth, a.s.r. will not forfeit its key strategic principle of value over volume. The GWP growth for P&C and Disability amounted to 5.2% over 2021 (2020: 4.6%).
The operating result for the Life segment amounted to € 763 million in 2021 (2020: € 730 million), well in excess of the target. a.s.r. aims to keep its operating result in Life at least stable compared with 2017 levels for the period up to and including 2021.
The operating expenses in relation to the basic life provision amounted to 45 basis points (bps) in 2021 (2020: 45 bps), within the stated target range. a.s.r. aims to decrease the Life operating expenses from 57 bps on its basic life provision in 2017 to within the range of 45-55 bps.
a.s.r.’s fee-generating businesses in the segments Asset Management and Distribution and Services are growing in terms of absolute and relative contributions to operating results. a.s.r. aims to achieve more than € 40 million of operating result for the two segments combined and to increase its operating results by 5% per annum thereafter. The operating result of the feebased businesses amounted to € 64 million in 2021 (2020: € 57 million).